World’s Poorest Represent $5 Trillion Market Opportunity, Report Says

Wednesday, March 21, 2007

The poorest 4 billion people in the world represent a US$5 trillion market, according to a new report from the International Finance Corporation and the World Resources Institute. The study is the first comprehensive, data-based assessment of the size and needs of people at the ?base? of the economic pyramid. Although each person in this sector has less than $3,000 per year in local purchasing power, with innovative business practices companies can provide inexpensive, better-quality services for the poor and still make a significant profit, the report says.

Released on March 19, The Next Four Billion: Market Size and Business Strategy at the Base of the Pyramid is a 150-page report that uses data from national household surveys of 110 countries. It discusses the unmet needs of the world?s poor as well as the so-called ?base of the pyramid (BOP) penalty??the higher prices for basic goods and services that many if not most poor people must pay, simply because no other options exist for them.

The poor are already consumers, the report notes, so by addressing their needs, the private sector can simultaneously lower prices of goods and services, improve the quality and quantity of these, increase access, create jobs, and garner profit. ?In the end, competition is the consumer?s best friend,? Dr. Nariman Behravesh of Global Insight said at the report?s launch. To create this competition, the report recommends innovative business practices and unconventional partnering between nongovernmental organizations, government, and the private sector.

Professor C.K. Prahalad, inventor of the ?base of the pyramid? idea, noted that this report shifts debate away from whether globalization is ?good? or ?bad? and toward using globalization for creating solutions for poverty. ?I start with the assumption: globalization is like gravity. No point in denying gravity. What we need to do is to understand it well enough so that we create a plane that flies,? he explained.